Slide 1: Interim results 2008
For personal use only Interim results 2008 Craig Dunn Chief Executive Officer Paul Leaming Chief Financial Officer 28 August 2008
Slide 2: Executive summary
Executive summary Sound operating result in challenging market For personal use only conditions, demonstrating resilience of business model ¾ Stronger results in businesses previously flagged for improvement - Contemporary Wealth Protection and New Zealand ¾ Steady results in businesses more expos
Slide 3: Key performance measures
Key performance measures Underlying return on equity up from 38.0% to 40.5% For personal use only Total operating earnings up 3% to A$394m¹ Cost ratio up from 38.5%¹ to 39.9% Growth measures: ¾ Net cashflows in AMP Financial Services down 69% on 1H 07 to A$760m and AMP Capital Investors net
Slide 4: Outline
Outline Group overview For personal use only Business line review Financial overview Strategy Outlook Summary 4
Slide 5: Overview - 2008 first half profit summary
Overview - 2008 first half profit summary A$m 1H 08 1H 07 2H 07 1H/1H % change For personal use only AFS Contemporary Wealth Management 142 145 161 - 2% AFS Contemporary Wealth Protection 76 59 60 + 29% AFS Mature 89 95 95 - 6% AFS New Zealand 27 24 24 + 13% AMP Capital Investors 78 78 72 - BU opera
Slide 6: Overview - assets under management
Overview - assets under management For personal use only 140 129.6 120 19.5 117.1 110.4 1.9 17.3 100 96.4 19.0 1.7 2.9 82.8 19.2 80 19.2 2.6 60 3.2 108.2 98.1 88.5 40 74.6 60.4 20 A$b 0 1H 04 1H 05 1H 06 1H 07 1H 08 Open business Group Closed business (1H 04 to 1H 07 AFS Mature and Cobalt/Gordian; 1
Slide 7: Overview - group cost performance
Overview - group cost performance For personal use only 500 442 421 393 400 379 375 95bps 81bps 300 44.0% 73bps 72bps 67bps 41.1% 200 39.9% 39.2% 38.5% 100 A$m 0 1H 04 1H 05 1H 06 1H 07 1H 08 Controllable costs Cost to income ratio Controllable costs to AUM All prior period numbers have been restate
Slide 8: Overview - business unit operating earnings and underlying investment income
Overview - business unit operating earnings and underlying investment income For personal use only 412 401 345 89 95 292 92 245 83 88 306 323 110 101 253 99 90 209 73 157 A$m 1H 04 1H 05 1H 06 1H 07 1H 08 BU op earnings - open businesses BU op earnings – Underlying closed businesses investment incom
Slide 9: Business line review
For personal use only Business line review 9
Slide 10: AMP Financial Services - 1H highlights
AMP Financial Services - 1H 08 highlights Resilient, diversified business delivered 3% increase in For personal use only operating earnings to A$334m Contemporary Wealth Management’s operating earnings down only 2%, despite falling markets Operating earnings for Contemporary Wealth Protection
Slide 11: AFS overview - 1H cashflows
AFS overview - 1H 08 cashflows Cashflows impacted by market downturn, which reduced For personal use only discretionary contributions in 1H 08 in contrast to regulatory- driven boosts for super flows in 1H 071 ¾ While superannuation guarantee contributions remained steady, discretionary contributi
Slide 12: AFS overview - 1H cashflows
AFS overview - 1H 08 cashflows Performance in planner channels reflected impact of subdued For personal use only investor sentiment ¾ AMP Financial Planning net cashflows down from A$1.5b to A$656m ¾ Hillross net cashflows down from A$486m to A$10m; also impacted by A$121m outflow following depart
Slide 13: AFS - cost performance
AFS - cost performance For personal use only 300 274 278 267 270 262 104bps 250 41.8% 89bps 200 78bps 38.6% 68bps 71bps 150 36.1% 34.0% 34.0% 100 50 A$m 0 1H 04 1H 05 1H 06 1H 07* 1H 08 Controllable costs Cost to income ratio Controllable costs to AUM Planner related variable costs previously includ
Slide 14: AFS Australian contemporary wealth management
AFS Australian contemporary wealth management Contemporary wealth management Change For personal use only 1H 08 1H 07 Operating earnings A$142m A$145m - 2% Controllable costs1 A$172m A$174m - 1% Cost to income ratio1 43.9% 43.3% + 0.6 percentage points Retail net cashflows A$683m A$2,100m - 68% Corp
Slide 15: AFS Australian contemporary wealth protection
AFS Australian contemporary wealth protection Contemporary wealth protection Change For personal use only 1H 08 1H 07 Profit margins A$66m A$57m + 16% Experience profits A$10m A$2m + A$8m Operating earnings A$76m A$59m + 29% Operating earnings / API1 24.3% 20.9% + 3.4 percentage points Controllable
Slide 16: AFS Australian mature
AFS Australian mature Mature Change For personal use only 1H 08 1H 07 Operating earnings A$89m A$95m - 6% Controllable costs A$33m A$33m Steady Controllable costs/AUM1 37bps 35bps + 2 basis points Net cashflows (A$522m) (A$614m) + 15% Persistency 89.3% 87.6% + 1.7 percentage points AUM (pre capital)
Slide 17: AFS New Zealand
AFS New Zealand New Zealand Change For personal use only 1H 08 1H 07 Profit margins A$22m A$26m - 15% Experience profits A$5m (A$2m) - Operating earnings A$27m A$24m + 13% Controllable costs A$33m A$29m + 14% Cost to income ratio 43.1% 42.5% + 0.6 percentage points Individual risk API¹ A$98m A$101m
Slide 18: AMP Capital Investors - 1H highlights
AMP Capital Investors - 1H 08 highlights Higher fee income from diverse investment base held For personal use only operating earnings steady at A$78m in weaker market ¾ Performance and transaction fees up 23%, primarily from infrastructure, equities and property ¾ Total management fees up 5% to A$
Slide 19: AMPCI overview - 1H key financial results
AMPCI overview - 1H 08 key financial results AMPCI Change For personal use only 1H 08 1H 07 Operating earnings A$78m A$78m Steady Internal management fees¹ A$88m A$83m + 6% External management fees¹ A$105m A$101m + 4% Total performance & A$59m A$48m + 23% transaction fees Controllable costs A$138m A
Slide 20: AMPCI - drivers of cashflows
AMPCI - drivers of cashflows 120 For personal use only 111.1 0.8 0.0 110 (0.4) (0.6) (0.7) (0.7) 101.4 100 (8.1) 90 80 A$b 70 AUM at NZ market Australian Asian Australian AMP Australian Investment AUM at 30 1 Jan 08 flows external distribution contemporary Group run-off performance June 08 flows cha
Slide 21: AMPCI - volumes and profit margins
AMPCI - volumes and profit margins 15.3bps For personal use only 13.9bps 120 11.6bps 68.1 100 10.3bps 65.1 9.7bps 60.9 80 54.4 48.8 60 40 20 21.6 26.9 33.6 40.9 40.1 $Ab 0 1H 04 1H 05 1H 06 1H 07 1H 08 Average external AUM Average internal AUM Operating earnings after tax before net seed pool income
Slide 22: AMPCI - performance against benchmarks
AMPCI - performance against benchmarks 57% of AUM met or exceeded benchmark in 12 months to 30 June For personal use only AMPCI managed Multi-manager Diversified 99% 89% 92% 81% 84% 80% 79% 77% 71% Target 75% 64% 61% 40% 29% 22% 8% 7% Australasian Australasian Infrastructure Property Future Internat
Slide 23: AMPCI - performance fee breakdown
AMPCI - performance fee breakdown For personal use only Performance fees by Performance fees by asset class benchmark v absolute return Property 11% Absolute return 34% Equities 33% Benchmark 66% Private equity 15% Infrastructure 41% Note: Based on 1H 08 performance fees 23
Slide 24: AMPCI - cost performance
AMPCI - cost performance For personal use only 160 61.0% 138 58.4% 124 55.2% 120 104 53.6% 51.4% 93 85 80 26.2bps 24.2bps 22.9bps 22.8bps 22.1bps 40 A$m 0 1H 04* 1H 05* 1H 06* 1H 07 1H 08 Controllable costs Cost to income ratio Controllable costs to average AUM – basis points** *Some minor restateme
Slide 25: Financial overview
For personal use only Financial overview Paul Leaming Chief Financial Officer 25
Slide 26: Financial overview - key points on P&L
Financial overview - key points on P&L A$m 1H 08 1H 07 2H 07 1H/1H % Tax benefit lower than change anticipated due to lower For personal use only Total operating earnings 394 382 388 + 3% taxable income Underlying investment income 73 90 68 - 19% Interest expense on Group debt (37) (26) (33) + 42%
Slide 27: Financial overview - profit sensitivities
Financial overview - profit sensitivities FY 08 profit sensitivities Investment A$m Operating earnings Total For personal use only income Total CWM CWP Mature NZ AMPCI Total AFS Economic variables 10% Ï in Australian equities 11 - 3 - 14 5 19 14 33 10% Ð in Australian equities (11) - (3) - (14) (5)
Slide 28: AMP remains well positioned to withstand market volatility
Financial overview - AMP remains well For personal use only positioned to withstand market volatility Current market issue AMP financial position Low cost ratios moderate impact of any potential profit decline relative to higher cost competitors Volatility in 47% of 1H 08 BU earnings largely immune
Slide 29: AMP remains well positioned to withstand market volatility
Financial overview - AMP remains well For personal use only positioned to withstand market volatility Current market issue AMP financial position Prudently managed, diversified book of business means no shareholder or customer funds are disproportionately exposed to any one asset, asset class or cou
Slide 30: Financial overview - dividends and capital returns
Financial overview - dividends and capital For personal use only returns 46 40 2 32 22 27 21 18 2 14 40 40 40 19 22 13 14 22 Cents per share 2004 2005 2006 2007 2008 15% franked - interim 75% franked 75% franked 85% franked 85% franked 85% franked - final Interim dividend Final dividend Capital retu
Slide 31: Capital management - dividends
Capital management - dividends Steady rate of 22c a share for 1H 08 dividend takes For personal use only payout ratio to 94% of underlying profit In addition, 2c a share will be paid from Cobalt/Gordian sale proceeds Dividend policy remains to pay out 85% of underlying profits, 85% franked I
Slide 32: Capital management - strength & strategy
Capital management - strength & strategy Disciplined approach to capital management means AMP For personal use only remains soundly capitalised, with surplus capital above target level and A$665m above minimum regulatory requirements AMP Life has surplus capital above target level even at recent
Slide 33: Capital management - actions
Capital management - actions Evaluating options to raise Tier 2 capital in line with strategy to For personal use only optimise capital mix - any raising would be used to provide replacement funding for 2009 subordinated debt maturity of A$267m No plans for a buyback in this environment Two ke
Slide 34: Strategy and outlook
For personal use only Strategy and outlook Craig Dunn Chief Executive Officer 34
Slide 35: Strategy to invest in distribution and enhanced products & services
Strategy to invest in distribution and enhanced For personal use only products & services to drive long-term growth AMP’s investment aimed at driving strong value growth 1. Growing planner capacity and broadening distribution 2. Expanding to Asia through AMP Capital Investors 3. Growing customers in
Slide 36: Growing planner capacity and broadening distribution
1. Growing planner capacity and broadening distribution Goal: Strengthen core planner franchise, while building new channels to reach more For personal use only customers in high-value segments by increasing planner numbers and improving their productivity in the short term ¾ Planner numbers up by
Slide 37: Expanding to Asia through AMP Capital Investors
2. Expanding to Asia through AMP Capital Investors Goal: Establish AMPCI as strong competitor in select investment capabilities in For personal use only strongly growing Asian funds management markets by expanding Asian distribution channels and alliances to market existing Australian and global p
Slide 38: Growing customers in high-value segments
3. Growing customers in high-value segments Goal: Attract new customers and develop stronger relationships with existing For personal use only customers in high-value segments with new offers based on customer needs by continuing to drive growth in the at-retirement market in the short term ¾ 21%
Slide 39: Reshaping AMP Capital Investors into a high value-add investment manager
4. Reshaping AMP Capital Investors into a high value-add investment manager Goal: Drive margin growth in higher value business and market segments, by For personal use only delivering superior value to clients by refreshing investment platforms and research capabilities in short term ¾ New data wa
Slide 40: Other investment focused on key growth enablers
5. Other investment focused on key growth enablers Goal: Provide a strong platform to support business growth by For personal use only continuing to invest in people, technology and brand ¾ Purpose-built programs (eg Sustainable Leadership Program in AFS and Investment Leadership Initiative in AMP
Slide 41: Outlook
For personal use only Outlook 41
Slide 42: Outlook - overview and assumptions over five-year cycle
Outlook - overview and assumptions over five- year cycle For personal use only Top quartile TSR performance Requires 15% average annual growth in the value* of an investment in AMP over every 5-year cycle Operating earnings Dividend payout ratio Ongoing capital growth of 10-12% CAGR initiatives wher
Slide 43: Outlook - short term
Outlook - short term Global credit and sharemarket volatility likely to continue For personal use only in short term Australian economy slowing, but expected to improve once anticipated interest rate falls flow through in 2009 NZ economy faces tougher conditions, although initiatives such as K
Slide 44: Outlook - short term
Outlook - short term Continued market volatility means more challenging For personal use only outlook at least for remainder of 2008 AMP remains focused on making targeted investment to grow through the cycle, while prudently managing through current market conditions ¾ AFS costs expected to gro
Slide 45: Summary
Summary Solid 1H 08 operating result in very challenging market For personal use only Demonstrated financial strength and business resilience to withstand current market volatility Remain strategically well positioned for the medium term, with clear strategy and investment profile to capitalis
Slide 46: Appendices
For personal use only Appendices 46
Slide 47: Further information about…
Further information about… Topic Chart For personal use only AMP’s earnings by business line 48 AFS cashflows by channel and product line 49-50 AMP Capital Investors investment performance 51 AMP Group debt ¾ Overview 52 ¾ Debt funding schedule 53 AMP fixed interest portfolio – shareholder
Slide 48: AMP's earnings by business line
AMP’s earnings by business line For personal use only AFS Contemporary Wealth Management AMP Capital Investors operating AFS Mature operating earnings operating earnings 145 earnings 142 116 89 92 95 88 89 78 78 83 62 55 42 35 A$m A$m A$m 1H 08 1H 04 1H 05 1H 06 1H 07 1H 08 1H 04 1H 05 1H 06 1H 07 1
Slide 49: For personal use only
For personal use only 0 500 1,000 1,500 2,000 2,500 3,000 3,500 300 800 1,300 1,800 2,300 (200) Q4 02 Q4 02 Q1 03 Q1 03 (A$m) Q2 03 Q2 03 Q3 03 Q3 03 Q4 03 Q4 03 Q1 04 Q1 04 Q2 04 Q2 04 Q3 04 Q3 04 Q4 04 Q4 04 Q1 05 Q1 05 Corporate Super Direct Q2 05 Q2 05 Q3 05 Q3 05 Excludes cashflows from CCC, 3P
Slide 50: AFS net cashflows by wealth management product line
AFS net cashflows by wealth management For personal use only product line on rolling 12 month basis (A$m) 1 2 Corporate Super AMP-manufactured retail products 3,500 Corporate Super Direct 3,000 Corporate Super Direct - Restated 3,000 2,500 2,000 2,500 1,500 2,000 1,000 1,500 500 0 Q4 02 Q1 03 Q2 03
Slide 51: AMPCI performance in diversified funds
AMPCI performance in diversified funds For personal use only AMP Capital Balanced Growth Fund AMP Capital Conservative Fund Return Ranking Return Ranking Year 1 -7.70% 5 Year 1 -1.22% 5 Year 3 8.63% 1 Year 3 6.35% 1 Year 5 11.43% 1 Year 5 7.70% 1 Year 10 7.83% 1 Year 10 6.32% 1 Source: Mercer Pooled
Slide 52: AMP debt overview
AMP debt overview Total AMP Group debt of A$1,443m and S&P gearing of 13% at For personal use only end June 2008 Euro medium-term debt repayment due in November 2008 of A$312m, refinanced by A$350m 3-year debt raised in May CP program $152m with maturities up to 3 months; continues to be manag
Slide 53: Group on balance sheet debt funding schedule
Group on balance sheet debt funding schedule For personal use only Repayment (years) 30 June 2008 31 Dec 2007 0-1 114 190 1-2 267 267 2-5 978 628 5-10 - - 10+ 84 84 30 June 2008 31 Dec 2007 0-1 1-2 2-5 5-10 10+ 0-1 1-2 2-5 5-10 10+ Group debt 464 267 978 - 84 382 267 628 - 84 AMP Banking loan (350)
Slide 54: Immaterial shareholder exposure to these assets
Immaterial shareholder exposure to these assets For personal use only AMP fixed AMP SF1 SF1 Other interest portfolio shareholder fund Annuities 20%1 ($m) Fixed 531 2,478 1,966 interest portfolio US Alt A 1 - 4 US subprime 4 - 1 All underlying bonds in monoline portfolio are Australian or New Monolin
Slide 55: AMP Banking - business and funding model
AMP Banking - business and funding model Branchless Australian bank offering residential mortgages, For personal use only deposits and credit cards ¾ Direct and third-party distribution, including AMP Financial Planning and mortgage brokers Operating earnings of A$6m (1.5% of AMP’s 1H 08 operati
Slide 56: Legacy book - impact of markets
Legacy book - impact of markets Amount of AMP’s AUM comprised of non-cash based capital guaranteed For personal use only products has reduced significantly ¾ At 30 June 2008, customer AUM A$16b Australia and A$1.5b New Zealand (excluding capital and tax reserves) Assets are managed by AMP Capita
Slide 57: Comparison of gross returns with gross crediting rate
Comparison of gross returns with gross For personal use only crediting rate Equities versus bonds versus crediting rate 50% 40% 30% Return 20% 10% 0% (10%) 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1H 08 All Ords All maturities Gross crediting rate Accumula
Slide 58: Shareholder funds portfolio - how invested
Shareholder funds portfolio - how invested Overview of portfolio For personal use only June 2008 December 2007 Cash 45% 35% Fixed Interest 22% 23% Equities 19% 29% Property 14% 13% Key changes in 1H 08 In response to the credit crisis and equity market fall, AMP adopted a more conservative stance